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No Tech Bubble Here, Says CNN: "This Time It's Different."
ErichTheRed writes I saw this on the Money page of CNN today. Apparently, various stock analysts have declared that this run-up in stock prices is different than the 1999 version. OK, we don't have the pets.com sock puppet, Webvan or theglobe.com anymore, but when Uber is given a valuation of $40 billion, can a crash be far behind?
...Fool me twice, shame on me.
This is wise advice when discussing the Wall Street crowd.
it's not different at all is it steve?
Snowden and Manning are heroes.
This is the same main stream media that has been talking about the recovery of the American economy and glossing over the divide between Main Street and Wall Street. Whenever the market does crash, it seems like select players are always the winners, while the average Joe's retirement just got hosed.
with all the advertising, tracking, etc tie-ins that did NOT exist, the business models from pre-days were based on assumed success and figuring out a way to monetize it. its different now, but its overvalued. people buy taxis, uber is a replacement. people buy things from walmart, amazon is an alternative. and its more in the wheelhouse of consumers now. but again, i stress - tons of it (snapchat, etc) is way overvalued but snapchat mines valuable data and they arent in the red or imaginary money
ALL bubbles end badly as they are doomed to burst from day one.
Booms work on psychology of crowds until some unseen actor "flips the switch."
Well, there are a few tech companies that are way overvalued. Mostly some of the big internet companies that have no physical product. But the market in general isn't that overvalued. Companies are making more money than ever before and have won major victories in the areas of government control, deregulation, and labor rights. Its the golden age of the corporation, and if you want to make money you should be right in the middle of it.
Stocks go up, stocks go down. If the market doesn't crash I'll make money. If the market crashes I'll make even more money.
Seven puppies were harmed during the making of this post.
I mean basically we have $1 trillion worth of funny money from QE1-42 that has to be burned sooner or later anyway. If no actual real money is spent, is it really a valuation? Is it really a bubble?
"Malo periculosam, libertatem quam quietam servitutem." -- Jefferson
That ridesharing thing that's getting sued ten ways from Sunday for butthurting established taxi firms?
Something's definitely up if they're getting valued at $40 billion! That's 4 times the UK's annual agricultural output!
Political debates have me rolling my eyes so much I think I got optical whiplash. I should sue. - Foamy The Squirrel
Mortimer Duke: Fuck him! Now, you listen to me! I want trading reopened right now. Get those brokers back in here! Turn those machines back on!
In other words... pay no attention to the man behind the curtain... everything is just fine
We are certainly mid to late in this economic cycle. Fed policy has helped to inflate the price of equities due to low interest rates. The market is pretty fully valued, so beware. I am holding and paying attention to dividend yield. Uber, Facebook, Tesla. They are all grossly overvalued. I like stocks other people hate. Big oil, Walmart, Altria, Monsanto.
an ill wind that blows no good
Part of the definition of a bubble is that "this time it's different".
perhaps there will be an uber crash
My God can beat up your God. Just kidding...don't take offense. I know there's no God.
Its always different they say!! Enjoy the crash!!!! Yipppppeeeeeeee!!!!!!
Groupon, Twitter, Snapchat, Instagram, and so on.. are these Wall St. analysts f'n nuts?
Currently short on a lot of stocks. Please crash, please.
I remember in 1998 hearing the experts all say "This time it's different we won't crash."
The reason I would avoid Uber stock is their business model falls foul of the law in most of the countries where they operate, only a matter of time until they are shut down. A comparison to Kazza's business model would be more apt than snapchat but I agree the eyeball market is saturated these days.
And did you exchange a walk on part in the war for a lead role in a cage? - Pink Floyd.
If you think Uber is worth $40B, or Instagram worth $33B, I've got some tulip bulbs to sell you.
"National Security is the chief cause of national insecurity." - Celine's First Law
It would take a handful of non-retards to create and maintain something like facebook or snapchat. How do these useless things have employees and buildings?
In that the companies make money this time?
Google seem to be traded at P/E 26 (Google finance, assume that's on actual profits and not ideas for the future) which is pretty reasonable. The interest environment is shit and Google at least have an urge to do new products. Whatever they will always be the search and information gathering giant I guess one could question.
Facebook mean-while is valued at P/E 75 which is way higher.
Do I trust or care Facebook even remotely as much as Google?
No I don't.
I don't care for Facebook at all. So do their social platform deserve that? Then again at least they have made more money than before.
Something like Microsoft is 17.7 so whetever. H&M is 30 as comparison. Sure there's a bigger market to sell clothes to but there's a bigger one for Microsoft products too :).
I also figured out when the 2000 tech bubble was about to burst: I was at the local grocery store and overheard the following conversation between the clerk and bag boy as I was checking out:
<clerk>: "The manager said you don't need to come in to work tomorrow."
<bagboy>: "*chuckle* Hehe thats ok, I'll just stay home and day trade..."
I literally went home and cashed out 90% of my mutual funds after that. Unfortunately, my judgement failed me a couple months later, when I bought back in...and lost most of it...
007: "Who are you?"
Pussy: "My name is Pussy Galore."
007: "I must be dreaming..."
I love Apple and am a fanboy asshole who looks down on cheesy android crap....but, that watch ain't gonna cut it, man. I'm not taking short positions on AAPL yet, but I'm not buying anymore either, despite the stock continuing to climb.
The Vogons disagreed.
http://michaelsmith.id.au
Having CNN say there's no tech bubble is as credible as Fox News calling themselves "fair and balanced". CNN is owned by Turner Broadcasting, a division of Time Warner. Is having their front-line "news" network run a headline of "Tech Bubble - Another Crash Coming Soon?" in the best interest of the corporation? Especially when they're on the verge of one of the largest telecommunication mergers in the history of our nation? They need to instill -confidence- in the market for their deal to go through. What better way to accomplish that then with their "news" network?
But of course there's another bubble. Except, this time, it's not only in technology. That may be the one we best recognize, but there's also the student loan bubble, the health care industry bubble, and a second real estate bubble is already in the works. The 2008 recession didn't wipe out wealth, nor the heavy concentration of it in the hands of a small group of people; it only slowed the flow of it through main street. Now the economic metrics (unemployment rate, GDP, job creation numbers, fed interest rate, etc.) are looking good for investments to be made again. Now that Wall Street is ready to open up the floodgates, don't be surprised to see how much money flows.
And yes, I'm expecting that the next bubble burst to be the worst of the three, the first being the dot com bust, and the second being the "great recession". Because when we had our first two bubbles pop, nothing was really done to keep those responsible for causing it from doing the same thing all over again.
This is pretty much spot-on.
I remember the last bubble well. Anything with a dot-com name meant it was on the front lines of technology, and the impending everything-online economy would wipe away the old brick-and-mortar businesses who couldn't move as fast as the upcoming technology. It turns out that economics didn't move as quickly as they thought. Companies still needed a business model, and the established companies were often able to move into online business just as quickly as consumers demanded.
Today's high-value tech companies are trying new business models, either hoping to capitalize on access to a global market or trying to sidestep inefficiencies in the traditional business. Some companies might still be little more than investors' dreams, but it's not a widespread trend.
You do not have a moral or legal right to do absolutely anything you want.
Don't buy their stock, and don't get in a car with one of their drivers.
Come on man. UBER isn't even a stock. The so-called 'valuation' is somebody's pipe dream that hasn't been exposed to the marketplace.
ALSO there will ALWAYS be stocks that are over hyped and overvalued. Cherry picking individual issues and using them to characterize the market is a fools game.
March 10 2000 the NASDAQ hit 5132.
Now the NASDAQ is still well below the 2000 high on an inflation corrected basis. Even more so considering the burgeoning size of the tech economy over 15 years.
Maybe there is an argument that things are overwrought, especially in Vulture Capitalist Fantasy Land. But bubble? Nah.
What is your opinion on the Blacks?
but when Uber is given a valuation of $40 billion, can a crash be far behind?
a car crash?
one rule of thumb we were told in both my finance and economics units:
as soon as "experts", particularly media experts, start saying "no bubble" you can be pretty damn sure there is a bubble
It's not a bubble if the money is real. Here is the graph you need to look at. Notice that the p/e ratio of the NASDAQ was around 200 before the crash. When you have a p/e ratio like that, your income needs to jump 2000% to justify the stock price.
It might be argued that it is a little high now, but it's not anything near to what it was before (and if it is high, it's probably due to monetary inflation rather than irrational exuberance in stock prices).
"First they came for the slanderers and i said nothing."
How it works:
Worthless POS company has venture capital investors.
Venture capital investors get one of their other companies to buy a tiny sliver of POS company at inflated price.
POS company now has a theoritical worth of $$gazillion
Groupon, etc. all fluff companies, Facebook could easily be the next Myspace soon. Yet by inflating the price, FB gets in money which lets it buy stuff, e.g. Whatsapp that in turn lets it live longer.
Shadow bubble? Of course, that doesn't mean a bubble won't eventually form in tech stocks, or that one isn't already being inflated elsewhere in world of technology.
This comes at the end of TFA.
It little behooves the best of us to comment on the rest of us.
...because trillion bazillion for a craptagram sharing app makes sense.
The difference here is that Uber has a product. A vile, rent-seeking product built on the corpse of the American Middle Class, but a product nontheless. What companies like Uber and Amazon are doing is bringing the Wal-Mart model to the rest of the workforce. Driving down wages and benefits and skimming off the top of just about every transaction. The money there is huge, especially once you're entrenched. That's why they're valued so high. Real money is in ownership, not petty things like making products and providing services. That stuff's for the plebs.
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This is real simple. The stock market is just a fancier version of Las Vegas. All of the statistics and probability, the eigenvectors and eigenvalues, the computational third, fourth, and fifth dimension. And its still all a giant crapshoot because you don't have a crystal ball and can't predict the future. The seasons you can predict. The weather you can't (local weather forecasters are 50:50 5 days out). And every time the market is expected to perform as expected, something comes along: quantitative easing, or the weather or a war or a surplus of something or a drought, or some new unexpected technology, and then all is lost. People need food to eat. People need energy to heat homes, drive cars. The sun rises and sets. Apart from this, its a crapshoot. So be careful investing in energy and farming, and have a personal stake (ie: its your job) in anything else. Going in with anything less is less reliable than Vegas.
Uber has something the others don't... customers. It could be argued that the government created the market for them.
I remember the bubble. I remember the headhunter saying, a murder conviction maybe I still can't find you a tech job, but if it is only manslaughter, lets talk.
Hiring is recovering. The economy is doing well. Stocks are doing well. Nothing is overheated though, wages are fairly stagnant, and few companies are getting large investments without traditional business analysis.
I wish there would be a new bubble, I dream of a new bubble, but sadly, there is no bubble. You want money, you have to earn or scam it under normal market conditions, there is no funding for pipe-dreams, there is no overheated labor market pushing my rates up.
There isn't even a Y2K scam to dip in on. The next best bet is 2038 and the End of the Epoch. But so far a lot of jerks have already prepared the OSes for it, so the only profit center there might be the same COBOL systems that were last upgraded in `99. I'll make sure to keep my COBOL skills polished, but it seems like a longshot.
Uber has already won
I love the smell of smoldering luddites in the dawn of a new age.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
But anybody can say what could happen, just to get page views and to be able to advertise "they saw it coming" if it actually happens.
When investors can't earn almost anything on fixed income, they pile on stocks.
In essence, if interest rates=2%, stocks=x, if interest rates=1%, stocks=2x (apreciate so they give back the same rate of return), but then there's the other way around, when interest rates starts to rise, the stock market could crash predicting the revaluing of assets.
The math isn't exactly 2%, x, 1%, 2x, there are other factors, but the basic idea is still true.
A bubble is what happened before 2008, the market was overvalued by a lot, even with fed funds @ 8%. Completely different situation.
Bubbles by definition expand very quickly then pop. Today’s NASDAQ has been a steady move higher over the last few years built on solid company earnings. Just look at the heavyweights in the index, Google, Apple, Microsoft, Cisco, Amazon, Sun Micro to name a few. Most of the names have a historical decade plus track record to look back upon and judge them by. There will always be high-flyers but these hardly are representative of the index. In 2000 everyone knew that the internet and tech was the next new thing and this understanding caused people to believe that any company in this new sector was bound to succeed. We are, and by we, I mean tech investors are far more discerning now days then before primarily because we know what it was like to get burned in the past. We might make the same mistake we did in 2000 in the future but today aint it. Anyone claiming it is does not understand fundamentals or is just trying to grab headlines like CNN.
no one ever lost money faithfully following that advice
If your children ever found out how lame you are, they'd murder you in your sleep
Minsky was right when he said (roughly) that good times cause bad times. Keynes was right when he said the market can say irrational longer than you can stay solvent. Bottom line: people who are only "usually" clever can see the roots of the next crisis in progress. But it remains conversation-over-beer for most of us, because only those who are unusually clever can figure out how to profit from it.
I predict that the future is not predictable.
Table-ized A.I.
I would compare Uber to Napster, really. In terms of their predicted longevity. In terms of who they are up against. And in terms of who their customer base is. Literally on that last one.
If Uber "pops", it won't take even mildly savvy investors with it. Not sure how much of a hit that would be overall.
I've fallen off your lawn, and I can't get up.
Isn't the reason that you avoided Uber stock that it is a private company not traded on any stock exchange?
When thinking about tech stocks, I like to use a "Boeing" rule as a measuring stick. The globe.com is valuing Uber at 40 Bn (1/3 of Boeing). Boeing had 90.8 Bn in revenue for 2014. Uber claims to be able to generate 10 Bn "soon" Business Insider, but conservative estimates are closer to 2 Bn. So revenue is somewhere between 1/45 and 1/9 of Boeing. I know the comparison is a bit apples (not the computer) to oranges, but Uber's overvalued IMHO. Especially considering that Uber has almost no physical assets and Uber is a privately held company with no public numbers.
The difference this time is that people are out there building things that we actually need.
People fail to understand is that bubbles are not bad for the people who are lucky enough to get out in time. (And, yes, it's usually simply a matter of luck.) They are only bad for everyone else.
Financial analysts are the last people with an incentive to tell people about a bubble if they suspect one.
They take payment for you giving them the money, whether it was a good investment or bad. They take a bonus when it goes up, they demand more money to make up the difference (which they take a larger cut from) and if it goes seriously titsup, they get government handouts that you have to pay for from taxes or reduced utility from your taxes.
Then I'll be able to pick up major universities for about $1K each.
"This time it's different."
Well, the age based rebalancing 529 plan survived the crisis best, never went below the cost basis, and produced very reliable and steady gains. Averaged over 9% for 2005 to 2014.. The bond 401K net value dipped below the invested money for a brief period, 3 months in 2009 Feb-Apr 6% annualized return over 2005-14. The stock mutual fund went below cost basis most of 2009, but it too came roaring back, 7% annualized same period.
What about the super brain actively managed portfolio? It is the dog. 4% for that period. If you remove the 2% inflation component out, 529 did three times better than active management, even the bond fund was twice as good, the stock fund is 2.5 times better than active investment.
So, folks, the moral of the story is, go for dollar cost averaging, and do regular rebalancing. I was very fortunate I did not have to liquidate any of my portfolio in the middle of the crisis, that is what saved my tail. Not my active investment. Simple brain-dead $CA and the luck of not having to sell anything during the crisis.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
If the bulk of technology dollars were focused on social media, I'd say yes this is a bubble. Social media stocks are wildly overvalued. But that's only a small segment of the tech market these days. Tech is permeating everywhere. What's going to happen is a collateral damage effect from the upcoming FCC Title II ruling, assuming that it stands. Further, there is a steady rise in sub-prime lending for things other than houses e.g. cars and college education. Bubbles form when a market rise is based on bullsh*t and/or "social engineering."
No, no, it takes just one guy and a dedusted 386SX from the attic, running NetBSD. Should cope with tens of millions of requests per day just fine.
CLI paste? paste.pr0.tips!
I don't trust what they are telling us personally. I really would like to take some of my money and invest, but everything is so seemingly inflated that I am afraid it'll all crash soon. If we do have a crash that would be a good time to invest possibly. Anyone who bothered to invest back in 2008 after the stock market took that massive dive would have a ton of money by now. So I might try something like that who knows.
The reason I would avoid Uber stock is their business model falls foul of the law in most of the countries where they operate, only a matter of time until they are shut down.
Ha! Don't you get it?? Laws are meant for you and I, not for huge companies (or the .0001% who control them)... though I imagine that you may've been told differently).
With billions in venture capital funding to play with, it's only a matter of time until Uber gets most of those laws rendered moot - at least the ones that matter, anyway; Uber will obviously have to continue to strategize and pick their battles (Deutschland, for example, probably won't be selling out their taxi industry to Corporate America any time soon). :)
*Would* avoid, meaning "if he could buy stock, he would avoid it". A web site just for you: Reading is Fundamental.
Yeah, one stock being fantastically over-valued doesn't mean the whole market is. Look at price to sales, price to earnings and book value. When those are out of whack, it's overvalued (or undervalued).
"Let's kill first the bankers, with their respectable demeanors..."
Just buy some put calls on the index or the stock price, or long term leap put calls, if you expect the crash.
The only problem with those is that if the price doesn't go down, you lose all your invested money in those puts by the due date.
Cause it's reverse psychology, a lot of fools with money will think that because it's a bubble--buy now and time the pull out to cash in big. Much like betting at the track. You make cash on Wall Street by buying, then selling at the right time. Just buying will get you nowhere.
But that usually ends in failure as the insiders already know when the market drops out--cause they are the ones who will start it. Some will strike it though.
Separating fools from their money is common place in Wall Street. For the rest of us (ie. institutionals for example: they hope to weather it, some will get caught much like 2001 and 2008, but the gov't will come to the rescue). Don't blame the player, blame the game in this case.
But once uber gets the laws sorted out by spending money, there are other big companies to move in to the same market. Uber doesn't have much uniqueness to last and hence no pricing advantage in the long run.
Bingo Dictionary - Pragmatist, n. A myopic idealist.
Uber doesn't have much uniqueness to last and hence no pricing advantage in the long run.
The same can be said for eBay.
Then it's good for eBay that it's business model doesn't depend on buying laws. Even when it was new, it was far less illegal than uber is now in most places.
Bingo Dictionary - Pragmatist, n. A myopic idealist.
https://www.change.org/p/obama-administration-put-a-cap-on-market-capitalization-of-listed-companies
Casteism